Prepare your automotive business for significant changes in consumer law

The Digital Markets, Competition and Consumers Bill (the “Bill”) signals a new era for consumer protection. It proposes major changes to the way in which businesses trade with their customers and how they will be regulated, giving the Competition and Markets Authority (the “CMA”) the power to issue huge fines against businesses that breach consumer law.

Although the Bill is not expected to become law until 2024, many businesses have already started preparing for its wide-ranging impacts. This article sets out the key changes that the Bill will make and how your automotive business can start preparing now.

Key changes made by the Bill

The Bill gives the CMA much stronger enforcement tools and the power to use these tools directly against businesses that are breaching consumer law, without first having to go to Court. The CMA will be able to:

• Investigate and gather information from businesses
• Issue public infringement notices and, most notably
• Issue fines for breaches of consumer law which could be up to £300,000 or 10% of the company's annual global turnover (whichever is higher)

Businesses could also be liable for substantial daily fines if they fail to comply with the CMA's directions or notices. Under the Bill, the CMA will be putting unfair consumer practices - or blacklisted practices - under a microscope. These include, in particular:

• Falsely telling a customer that a product will only be available for a limited time, or that the product will only be available on particular terms (for example, at a certain price) for a limited time, in order to obtain an immediate decision from the customer
• Promoting a product in the media where the business has paid for the promotion, without making that clear in a way which is clearly identifiable by the customer

Customer reviews are also squarely in the CMA's crosshairs, including the practice of businesses commissioning or providing incentives to a person to write a fake customer review and/or the hosting of customer reviews, without the business having taken reasonable and proportionate steps to check that the reviews are genuine.

Potential ramifications

The CMA will have the power to interview individuals (including company directors) as part of investigations and, if those individuals are found to have engaged in blacklisted practices, they could be:

• Subject to heavy fines
• Imprisoned for up to two years and/or
• Disqualified as a director.

The Bill, when it is made law, will significantly strengthen consumer protection. The CMA has already indicated, in its Annual Plan for 2023-24, that it intends to tackle “potentially harmful online selling practices”, so we expect to see a substantial increase in enforcement action being taken by the CMA against businesses of all types.

The potential consequences of the CMA taking enforcement action against an automotive business are likely to be significant. Aside from the previously mentioned financial implications resulting from a fine, investigations are likely to disrupt senior management time, distract from the profitable running of your business and result in bad publicity.

Preparing your business for the Bill becoming law

Ensuring compliance with the Bill is of paramount importance and Businesses should begin preparing for the Bill now. Although we understand every automotive business is different, the first steps should be:

• Reviewing how your business trades with its customers and
• Considering how to adapt your internal risk management processes

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If your business has any queries about the Bill or would like any further assistance with preparing for the Bill becoming law, please contact national head of automotive, Richard Coates.